It’s all about income protection

Hello and a warm welcome to our webinar. I'm Shelley Read and today I'm joined by my colleague, Gregor Sked and we're both senior protection technical managers here at Royal London. We're delighted to talk to you today about all thing’s income protection. But before we get started, if you're listening live today, after the webinar, you will receive an email which will take you to our Royal London CPD hub after you've successfully answered our CPD questions. You'll then be able to download your certificate. But bear in mind this email can take up to 24 hours to appear in your mailbox.

So, it wouldn't be a protection CPD learning event without some objectives. And here are ours today at the end of the session we hope you have a better understanding of how income protection really works from both applications, right through to claim and beyond. To be able to explain some of the key considerations to have when arranging income protection for employed and self-employed clients. And finally, to identify opportunities within your client bank to discuss income protection.

And to help us achieve these, objectives today, we've got a packed agenda. So, let's have a quick look at the main areas we'll be covering. Gregor is going to look at the income protection gap. There's some really good news here, but I won't spoil his thunder. I'll leave Gregor here to tell you more about that in a while. We'll remind ourselves of both the need and also the main features of how income protection work. And we'll also look at spotting opportunities to have discussions around income protection. I'll highlight some really key considerations at the application claim and underwriting stages to ensure the best outcome for your clients. Then we'll have a brief look at income protection for business owners before collecting together our final thoughts. So, Gregor, as promised, can you tell us a little bit more about the income protection gap?

Yeah, of course I can. And morning, everybody. So, income protection, I would say, is arguably the most needed long term protection product because, after all, what do people rely on to maintain their lifestyle is through income, isn't it? So, the loss of all or some of that income, surely one of the biggest risks a customer faces. And without it, how do they expect to cover mortgage repayments, rent, utility bills, the weekly food shop, car repayments, family holidays, maybe being able to put money aside for savings and so on. Now the protection gap isn't necessarily a new issue. And if we head on to the next slide, we have a way to just how exactly that protection gap looks as it's not a new issue, and the number of people, either with or without financial protection might not be a surprise.

What we found within a research report that we carried out in 2023, called the Gender Report, was that very few individuals, actually have financial protection. And we found that looking at homeowners who own their home outright, only 7% of these individuals having income protection, only 20% of mortgaged homeowners having protection, and only 6% of people in rented accommodation have income protection. So definitely the protection gap isn't going away anytime soon looking at some of the stats on screen.

Now I need to give credit to insuring change for the graph that we're looking at on screen just now. This is a bit of an overview of income protection sales over the last 30 years. Now, I could actually take up our whole session today with a bit of history lesson on insurance, but we are short in time so instead I'll just point out a few notable periods for income and protection. Actually, one thing that I find really interesting is that while income protection might seem like a relatively new innovation from the last decade or two, actually it can be traced back to the late 19th century as a product developed by the friendly societies but we're not in an episode of time team today. So, let's just take a little look at the last 30 years or so now and the early 80s, 90s the product that we know enough today is income protection is generally known as permanent health insurance. Critical illness cover was also relatively new in the market, often as dread disease insurance and it only hit the UK market in the early 80s, and it actually didn't really take off for another decade or two. Life insurance was starting to see quite a big demand, thanks to the rise of interest only mortgages, and actually, the need for repayment of that capital meant that endowment policies did take centre stage. Also, thanks to a booming housing market in the early 2000, the sale of income protection skyrocketed, and this led to the peak sales that we saw in 2002, there was 240,000 income protection policies being written. Now the fall of sales from that point onwards, I would say, is, was driven quite largely by banks pulling away from selling income protection alongside the product often being quite wrongly associated with the tarnished PPI product. In the years that followed, we saw the formation of the Income Protection Task Force or the IPTF, and they focused hugely on turn around the decline in sales, and they played a huge role in demonstrating the importance of income protection. We saw that through various different campaigns over the years, most notably the 7 family’s campaigns in 2014. Since then, we've seen income protection sales actually gradually grow. The exception been around 2020 when the pandemic struck but looking actually at more recent figures, looking at 2023 income protection sales, we saw a 10% increase, according to Swiss Re. The last three years have also seen some pretty big regulatory changes. We've seen the mortgage market review, RDR and of course most recently Consumer Duty, which has certainly resulted in the industry having a much greater focus on protection needs and making sure that those protection needs are being discussed as part of wider holistic planning to avoid foreseeable harm. Now, last week you might have seen the ONS is labor market data publication that highlighted the economic inactivity due to long term sickness remains and their words concerningly high. Within the publication they announced that for the quarter between March and May of this year, 3.81 million people are economically inactive due to long term sickness and can really plugs that need for income protection.

Now, Shelley, I'm sure you agree that the increase in number, of advised income protection say is a positive sign for the industry. But what are your thoughts as to some of the drivers behind income protection sales?

Thanks, Gregor. Yes, definitely. There are a fair few things that I think drives income protection sales, and I've just listed just five of them here. So, mortgage advice I think that's definitely comes first. And it's no secret, is it, that buying your first home and taking out a mortgage is, for most of us, the first time we even think about protection or even someone takes the trouble to talk to us about it. And the good news is that it appears that Consumer Duty has encouraged more and more advisers to have really robust protection conversations and build a bespoke protection portfolio that will include covers and areas outside of mortgage protection, such as CIC, family income benefit, and also our core subject today, income protection. And I think worth noting the rising age of mortgage and remortgage borrowers by extending the term may be for affordability currently may be making these borrowers take the need to ensure continued earnings for longer a little bit more seriously.

And Covid, it's certainly highlighted, earnings vulnerability, didn't it? And made us ask ourselves, what if this happened to me or my family? And I think this reduced some resistance to income protection discussions and the ultimate sale of income protection policies. Now referrals again, as Consumer Duty directives dictate that advisers should refer their client’s protection advice. If it's not going to be something that they discuss themselves. Then these protection industry experts are, I think, more aligned to income protection in their recommendations. And also, as advisers refer more clients to other professionals such as solicitors, accountants, will writers, maybe letting agents then perhaps this has opened up new referral relationships and new clients to talk about the need for income protection. Now our changing housing landscape in the UK, I mean here really that many more people are living in the private rental sector and advisers, I think, are now more inclined to talk about the need to protect not only their outgoings and lifestyle, but also to protect their hard-earned deposit. We know that many people in the housing rental sector still have aspirations to buy their own home. And I think that protecting this deposit by means of an income protection plan, or maybe even coupling it with a family income benefit policy within a menu plan, can avoid having to use that hard earned deposit for utility bills and grocery shops. And finally, industry developments. I think that many of us have providers have evolved products to make sure they fit not only the needs but also budget of our customers. So, for example, introducing shorter benefit periods such as 1, 2 and 5 years has meant that this product becomes much more affordable to many clients.

Now, despite the gap that Gregor ran us through a little while ago, there is some really good news. New income protection sales, according to the Swiss Re Health and Term Watch, in May of this year actually increased by 10%. I think this has probably got an awful lot to do with Consumer Duty and actually policies with a two-year limited payment period that I just referred to a couple of minutes ago have actually increased by over 12%. So that's got to be good news.

Let's have a look then at the need for income protection. At Royal London we sometimes call this the vicious circle, and you'll hopefully see what I mean in just a moment. So, if we start at sort of 12:00 at the top, if someone suddenly is off work sick, the likelihood is that they will lose their income either immediately or when their employee benefits come to an end. Now, being ill, does it mean that those bills disappear? There's still mortgage, rent, utility bills, credit cards, a car loan, whatever it might be that still those commitments to find every month. Now, most times people are ill, particularly if they are diagnosed with a serious illness. They definitely need time to recover, and they need that time without any financial stresses. Those financial worries can mean that someone looks to return to work far too early before they're in a fit condition to do so. And this can often result in the reoccurrence of that incapacity and then having to take some more time off work. So, you can see why we often call this a vicious circle. So, is there a backup plan? There are many things that we consider. May be savings. May be looking to borrow from, family, maybe even relying on state benefits. But the ideal solution is to have a robust protection portfolio that includes income protection, to make sure that you can take time to recover from an illness without any financial stresses.

So, Gregor let me hand back to you now to help us just understand a little bit more about the income protection production. Yeah, so over the last few weeks, we've been carrying out a few polls on social media, you may have seen some of these. Just to gauge some of the common barriers that advisers face when discussing income protection, and some of the responses we've got might not be a surprise. The most common barrier that we saw, with around 62% of responses saying that this was the most common barrier was the price. And Shelley, you touched on a second go over in some of the industry developments that we're seeing to help provide more flexibility and come to the cost of these types of products. And the second most common barrier was the complexity of the product. So, I want to try and address some of those barriers, over the next few slides and throughout the rest of our session today. So, let's just take a step back for a moment and thinking about the flexibility and complexity. And actually, what exactly are we here talking about today. And of course, going back to basics with income protection to put it simply, income protection is a way of replacing some of your income. If you can't work because of an illness or an injury, that's not a way of replacing your entire income. Instead, you typically be replacing the percentage of it. If somebody claims on their policy, they'll often need to wait for a certain amount of time to elapse before any money is paid, that is known as a deferred period. Once the deferred period has ended, then the person that's covered will receive a tax-free monthly income. The length of time that those payments will continue for ultimately depends on whether the policy has been set up as a short-term policy or a long-term policy. If it's a long-term policy, customer will receive the money for the entire period they're off work, sick until the end of the policy term, or if they return to work or die. If it's a short-term policy, then the customer will receive money for a limited amount of time, typically between 1 and 5 years.

Now there are two main types of income protection. What we're going to be looking at today is individual income protection. But some insurers also offer group income protection. But for this we're going to focus primarily on individual income protection, which in itself can come in three main forms. We've got personal income protection, which is typically written on a normal life basis for the individual covered, we've got executive income protection, which is for business use now, with executive income protection these contracts are owned by the company, written to a particular point in time in the future, and tend to offer a range of deferred periods very similar to personal income protection. But with executive income protection the proceeds from the policy are paid to the company and then paid to the employee, net of income tax and national insurance. The company can also include here company pension contributions, and they're often portable as well so that's an individual moves they can take the policy with them. Key personal income protection again for business use. These policies are owned by the company. The maximum amount of cover is typically based on the percentage that's attributable to the profits. The length of time that these policies can be a force for is shorter, and also the benefit periods are limited to either 12 or 24 months. Now, when the benefits paid for the claim is paid to the company, and it's used to replace things like lost profits, as well as provide the business with some cash flow. Remember here the benefits will go to the company as a trading receipt. Now another really important thing to remember is that with key person income protection at the end, there's some rules may apply and there's generally no portability option here.

As group income protection is not something we're going to look at in great detail today but just so you get an awareness of it, here the employer is the policyholder. Premiums are paid to the insurer by the employer, and claims are generally paid to the employer to pass on to the employee through the PAYE system. As I said, we're not going to cover it today, but it is worth noting that these can be very valuable employee benefits because in a lot of cases, the risk is pulled and the underwriting is simplified, which means customers with more complex medical histories might be able to access insurance that otherwise might not have been available or affordable as within individual cover. So, while it's certainly beneficial, another thing to think about here with group income protection, is that it's only really beneficial as long as the individual is with the employer offering the benefit.

Now, jargon is something that sadly, our industry is riddled with, and income protection is certainly a product that carries a lot of jargon. Now I'd be really keen to hear from yourselves using the chat facility, the chat box on your screen. What are some of the common jargon phrases that you've come across, either with income protection or other types of insurance? And maybe what we can do after these sessions to do a bit of jargon buster. But what I wanted to look at today are 2 or 3 of the most common inking protection jargon terms that I've heard advisers, say clients often struggle with. So, let's take a look, firstly at misrepresentation.

Now misrepresentation is ultimately the admission of material information that an insurer has asked for. The Association of British Insurers actually have three definitions of misrepresentation. Firstly innocent. So, this is where information is being provided without realising that it's incorrect with the belief that it's correct or truthful. So, there was no real intention here to cause that deception. Second, the term that we use is either careless or negligent. This is where information is being provided that's either untrue or misleading and maybe not deliberate, but inaccurate or incomplete. The third form of misrepresentation, according to the ABI, is deliberate or reckless, potentially even fraudulent, this is false information has been provided knowingly and intentionally or concealed to actually gain an advantage. And this could be, the trying get cover at a lower premium or actually just to get cover at all. Now, where misrepresentation actually occurs, insurers tend to have a few different remedies available. If misrepresentation has been innocent, then the remedy that insurers can use is to pay the claim in full. If it's careless or negligent, then the insurer could apply a proportionate remedy, so that could very well include admitting the claim on the terms that would have been offered, or potentially to decline the claim and refund the premiums if the terms wouldn't have been offered. And deliberate or reckless, even fraudulent, then the claim could very well be declined and the policy voided.

Now, another really common jargon phrase I've come across is with benefit periods. And we've kind of alluded to this a little bit already. This is the length of time that any monies would be paid for after a deferred period ends, with full time income protection that pays out for the duration of the insurance contract until the customer returns to work, or they pass away. With short term income protection as I said earlier, it typically comes in the form of shorter time frames where the benefit will be paid either 1 year, 2 year, possibly even 5 year periods.

And the last bit of jargon that I want to look at is with incapacity. Now, the reason I'm pulling this part out is because it's really important when it comes to income protection. It's also one of the most common areas that we see confusion, certainly not helped by the fact that insurers all have, or all use very different terms of incapacity. Now incapacity ultimately is the definition that’s used for making a claim on an income protection policy. I'd say most insurers use, different definitions there's one standard definition that’s used.

Some of the most common definitions are own occupation. Now this is the rule that the customer had before they became disabled or had to take time off. This is considered the most comprehensive definition, and this is what we use at Royal London. You might come across any occupation of that means a customer will only get benefits if they're unable to carry out any occupation at all. Suited occupations, so this refers to other job roles that customers might be able to do, and often based on their professional qualifications, work experience and skill. Something just to point out from a Royal London perspective is if customers are working less than 16 hours, then we will actually assess them based on serious illness or everyday tasks rather than owned occupation. So, I'd be interested to see, after today's session, of some of the common jargon terms that you've got. But Shelley, I want to have a little look now at the application process and some top tips for applying for income protection.

Yes, of course and I think the application process is so, so important when we're talking about income protection. So, let's just have a look at some key considerations that we've put together. So, I think the first thing to think about is how long could a client cope financially without their income. Maybe they have savings, maybe they have, a second job. But that's the first consideration I think to make is how long could they cope? The other thing is to think of how much cover is needed in relation to their income. We know that their, maximum amount within income protection, but it may well may that a client needs much less than that. Maybe they have another partner where their income hopefully would be continuing. But an important consideration to set up how long they need that for and how much they actually need. So how much income do they receive if they become ill and for how long? This is really referring to any employee benefits they might have. I think it's super important right at outset to find out from a client exactly what their employee benefits are. Many people aren't aware, they know they might have them, but they're not, aware how long they'll receive them and how much they'll receive. So very important for you to be able to give advice and dovetail any income protection. Now, when should the cover stop? I mean, it could stop at the end, of the policy, but when should that be? Should it be at retirement age? It might be that they want cover to stop when their children become financially independent. Or it could be at the end of their when their mortgage is going to be repaid.

Now, should this the cover, say, level or increase annually? And we're talking here about indexation. Clearly, I'm not the adviser on the call today. You ladies and gents are. But I personally think, if we're talking about a policy or a cover that pays an income, so income protection and also this applies to family income benefit, then I think it's really important to at least consider indexation or at point of claim the solution that you thought that you'd set up might not actually meet those needs. And finally, looking at premiums to suit not only needs but also budget, it's pointless setting up a premium that a client isn't going to be able to maintain. So again, looking at those benefit periods that Gregor just covered with us. Is it going to be worthwhile considering a shorter benefit period that will that premium down? So that's a key consideration, I think. So, Gregor, I'm just going to hand back to, you know, that we've considered some, things with application. What should we consider at underwriting?

Yeah, it's a nice follow on from application going to underwriting. So, if we just take a look at some top tips and again, following that theme of some key tips, I would say when it comes to underwriting, one of the most important tips to be aware of is just be as accurate as possible with customers applications. In particular, when they're referring to their occupation, it might sound obvious making sure that their occupation is correct, but it's a crucial thing to make sure that it's accurate, to get the right quote and make sure the occupation that's been selected best reflects what the customer does on a day-to-day basis. Use any free text box as well on there during the application. Make sure that you do have access to free text boxes, that you can provide as much additional detail as possible during the application week as well we can actually help you with the Send the Client feature, where you can send an application directly to your clients to complete any medical details. And actually, by using that feature, it means clients can complete their details in privacy and a place in time that suits them, hopefully reducing the risk of clients aren't feeling open and comfortable to disclose something.

Now bringing in me to my next point, quite nice segue looking at making the most of pre-sell underwriting facilities. So, things like presale underwriting tools that can maybe give you an idea to how a customer's covered might be underwritten, or even being able to speak directly to underwriter, which again, something you can do with Royal London will really help the underwriting process as smooth as possible and hopefully set expectations up front as well. It's also really important with income protection applications, that clients are encouraged to disclose even relatively minor conditions during the application, and also be aware of the number of exclusions being applied there. There may be certain restrictions as to the number of exclusions applied before cover would be unavailable to be provided. Finally, with regards to income protection, it is a long-term contract and people will change jobs. They will have salary increases, potentially salary reductions. They may will see fluctuations to their financial requirements over time. So, with income protection, it is really key to make sure that that cover is reviewed on an ongoing basis to make sure that it is financially okay for both the client's needs and it's justified as well.

Leading up to today's webinar, we'd be looking at some of the most commonly asked questions from advisers as to income protection. We've also had a lot of common myths appear. So, what I thought would be useful, Shelley, is to bring you back in here and maybe come over, and help answer a couple of these common myths, maybe demystify some of these common income protection myths. So, the first one I'll ask to yourself, which is pre-existing conditions are always excluded, are you able to give a bit more light on that myth.

Yes of course. I mean, we always, as insurers, look to offer full cover. However, exclusions may apply if there's some recent or significant time off work, particularly when we're looking at income protection. But if it's not recent or if it's a one off or of a short duration, we may be able to cover standard terms. So, it's not the case that we will always exclude pre-existing conditions. It very much depends on the timescale and the significance of time off work. I think another area that that we tend to get, hear a lot from it advises, is that clients say that they're young and healthy and they don't need protection, isn't it?

Yeah, it certainly is. Now, I would say statistically, you are actually more likely to need to take time off work because of a sickness or an injury than you are to die prematurely or to become seriously ill. I think that notion of being young and healthy, you can certainly see it when you look at the average age of a Royal London income protection claimant. Look at last year, in 2023, the average age of a claim on an income protection policy was just 38. Compare that to 51 for critical illness insurance and 58 for life insurance. Certainly, a myth that's very easy to demystify.

So, the next two, I think we can probably answer to two together Gregor. It's a difficult project to underwrite. We hear that quite a lot. And also, some advisers think that most applications are declined. Can you look at those for us?

Yeah, I definitely think there was covered together. And I think despite concerns that underwriting is always complex or difficult for income protection, we actually do see quite healthy immediate decision rates for online applications, which actually I would imagine would be relatively typical in the market. And we see around 70% of applications get standard or non-standard term. So actually, it’s certainly a myth here. I'm going to I'll take the next one for you, Shelley. So, what do you think about this one rating for income protection is identical to life insurance.

Yeah, that's actually not the case. The rating for income protection is much lower per mil than it is for life insurance, as I think you alluded to earlier. We need to take into account more, less serious, illnesses and conditions in time off work than we might have done for life insurance. Such things as musculoskeletal conditions, for example, generally not life threatening, but they can have an impact as far as income protection is concerned. Maybe I'll pick up the next one as well. Often exclusions are the only option. Well, again, as I said earlier, we're always looking to offer full cover without exclusions. But again, here at Royal London we are very often talking to advisers and asking them to, you know, to check with their clients. Is an exclusion something that they want, or might they be happy with that illness or circumstance being included and accepting a rating for that? So, we don't automatically exclude on some circumstances we will ask if a rating would be, a preferred option. Something else we talk about quite a lot is second occupation. So, can you clear up for us, Gregor? You can or can't cover a second occupation.

Yeah. So, I'll do my best to clarify this one. So, it's certainly a common misconception. We can actually take into account secondary jobs when assessing income protection. And the customer can decide if they want to cover both jobs or maybe even just the primary job. And if they do want to cover both jobs and both jobs are accepted for income protection, then we would actually amalgamate the salaries and assess the occupation classes accordingly. It would be the lower of the two occupation classes that would apply, so as an example, if you had, an occupation class one and two, then we would apply an overall class of two. If the second job wasn't acceptable for cover, then we would exclude the second job and any injuries or conditions are arising from it. Shelley, I don’t know if you want to take a look at, a couple of the final two ones there.

Yes of course. So, I can cover a client who isn't working. Sadly, that's not the case and I think many years ago, some advisers will recall that it was possible to cover someone who was, a house person. But I think particularly as products have developed and particularly, talking about us here at Royal London, that when we're looking at our own occupation, it negates the possibility, really, of covering someone who doesn't have, paid employment. And I think the final one really is, asking about ancillary benefits and whether they can be claimed during deferred period. Well, the good news is that, yes, things like fracture cover and hospitalisation cover, you can receive those benefits even during a deferred period. So hopefully we've, we've included, answering some of those, those myths there.

So let's carry on, we've had a look at application and underwriting. Let's now turn our attention to claims. This is our moment of truth and we know super important for all of us. So what can we do to help pay more claims? We're looking for ways to minimise the risk that has been declined all the time. So whether it's improvements to application processes, all the information we give your clients. So just four things I'd just touch on very briefly, medical history. So if your clients are a bit unsure about a previous illness, the term of it or the exact medical condition, please encourage them to speak to their doctor before making an application so we get all of that information as accurate as we possibly can. And sick pay, make sure the level of cover and referred period suits your client's needs and circumstances. And really, I'm talking about checking again those employer sick pay arrangements because as we know, if they continue to be paid once an income protection plan has started to kick in, it can have a direct impact on the amount of cover received.

Application, it goes without saying a thing, but make sure that all the questions on the application form are answered. Don't leave anything out. And going back to Gregor’s mentioned about misrepresentation, make sure these are answered honestly and in full and use that free text box if you think there's anything we need to know. Customer reviews, it's a good idea, I think, to encourage clients, regardless of the time period and even outside of those reviews, but a good opportunity here to check on occupations and employers. If there's been any lifestyle changes that might mean that that income protection is no longer appropriate, and you might need to revise your client's cover.

Let's move on now to connected claims. And we speak to many advisers and particularly with the sure to benefit period policies. A lot of advisers think that that's the only amount of years that a claim can be used for. So let me show exactly how it works. So, we've got Kate here, she's unable to work due to sickness, and she's got a five year income protection policy. And she's got a deferred period of 13 weeks, so she's sadly got a bad back but because she's got a five-year benefit period with the insurer, she has a potential to make a claim for five years. So, she goes off work sick. Let's say that her deferred period, will cover that three months that she was waiting for her IP claim to kick in, and she claimed for two years and three months. Now, at the end of that, you can see that, bucket of income protection has now reduced to three years, and she returns to work. Now she returns to work, but she only returns to work for two months, and then she suffers a relapse of her musculoskeletal problem, and she has to go off work sick again. Now because she went back to work for only two months, this means that her new claim will be connected, so she has a further three years to claim if needed, making up that total of five years. And because it's a connected claim, she won't need to wait for her deferred period, we will start making the claim straight away. That will result, obviously, then in her income protection policy being, empty. She's had the complete five years.

But let's have a look now, if she returned to work for longer than six months. So she did her deferred period. She, returned to work for longer than six months. Then this is the key, the six months is the key, it will refill her income protection part, and she can start again, then with a five-year claim. So, she could make another claim, which would pay her IP benefit for five years. It could be the same condition or a new condition, but because she gone back to work for six months or more, she would need to start her deferred period again. So hopefully that will clear up our connected claims.

Let's end this claim section with some top tips for smooth claims. So ensure the customer understands when the cover will pay out and when it won't. So make sure they understand about deferred periods. Really emphasise the importance of notifying the insurer as soon as possible. So as soon as they go sick and we can start that deferred period, let's get that in place. And ensure all the application questions have been answered honestly and in full, to remove any risk of a claim not being paid due to misrepresentation, and ensure that the financial elements of the contract are realistic at that claim stage. As I said a little while ago, conducting regular reviews is so important to make sure that their income protection policy is still fit for purpose and ensure the customer is aware of the financial requirements that would be required at point of claim, and that might be tax returns, pay slips, or indeed their company accounts.

And engage with the insurer in the customer's preferred manner. So, we're very familiar with looking after vulnerable clients here at Royal London. And we want to make sure that we are liaising and communicating in the customer's preferred manner. So please let us know. And if the customer has any copies of medical reports, or you know, any details really regarding their condition, please submit them directly to us as the insurer because this can really reduce delays for us waiting to get medical evidence from a GP. So Gregor, as we come to the final parts of our webinar today, can you just run through how easy it is to spot the opportunity to have these conversations, please?

Yeah, absolutely I think hopefully what was it that they will have shown the importance of income protection and hopefully helps solidify some of the technical aspects of it, but in terms of how do we make income protection part of your advice? So how do we make it part of your advice? Well, this is a question we've asked a lot over the last few weeks, to try and understand what works and what doesn't work so that we can share some useful nuggets with you today. Now, I would say the single biggest response that we've got from advisers and or business investment managers as to what does good practice look like when it comes to sound income protection, it's to make it the first item on the agenda that should be the starting point of the protection sale. And actually, leading with income protection highlights not just the importance of the product, but also that we're underpinning the client's ability to protect their lifestyle. As it says on the screen, ask clients how would they feel if they'd just been paid for the last time? Does that help resonate the importance of that and that that income that the need to rely on? If you've got clients that have existing income protection, are they still fit for purpose? Is it worth reviewing any existing policies and force and making sure that financially that they're justified and also the policies themselves are suitable for the client's needs and scenarios. Does the policy have access to any additional services? And are the clients actually aware that they can access some of these additional services? Most insurers these days offer some form of additional benefit, often a no additional cost so just reminding clients that they may have access to these services that can help with things like access and bereavement counselling, therapies, virtual GP's and so forth can help demonstrate some of the additional value of having a policy in force.

Talking about risks as well. Your risk means very different things to different people. But how do we get clients understand the risks of various different life events happening to them before they stop working? Now, one of the ways that we often talk about risk at Royal London is through our risk report. Now to help you with that I’m going to introduce you to a case study. So, we're going to meet, Eleanor.

So, Eleanor is 30 years old. She's a non-smoker. She's expected to work up until retirement age of 68. And then if we had a hundred clients in this scenario, that match to Eleanor makeup. So, a young non-smoker planned to state pension age, I suspect that that may well mirror many of the clients that you're currently dealing with. But what's the likelihood that any one of these clients could find themselves or the family having to make a claim on a life policy? So, let's take a look, firstly at the probability any of any of these individuals claiming on a life policy, or their family's claiming on a life policy so passing away before age 68. Well, if we, do a big review, we are looking around about the 3% mark. So, 3 of 100 of these individuals, just like Linda, could pass away before they reach retirement. Now, what about the percentage of these clients that meet develop a critical illness before reaching age 68? Well, we are looking at around the 18% mark. So, 18% of these clients, just like Eleanor, might find themselves needing to make a claim on a critical illness policy. And lastly, what about the chance of any of these clients being off work sick for 2 or more months before they reach the retirement age? Well, in this scenario, we're looking at around about the 41% mark. So more likely the premature death and more likely the serious illness.

So, the chance of any of these risks happening through a client's lifestyle, we are looking more than a flip of a coin chance of around 53%. Now, the reason that I'm illustrating this today is just to show that we all face risks to some extent. How we visualise that will all be very different. But one of the ways that we can help you with that. As I say, there's a Royal London risk report, it's a very visual way to show clients the risks and probability of claiming on these types of policies, and it's all bespoke to them. And it can also really demonstrate the importance of having that mixture, that portfolio of different covers, to help cover the different risks that, that they face.

Now, one of the final things I would just very briefly touch on when it comes to positioning income protection is avoidance of describe it as paying when you get signed off work sick or covering you if you get sick note because a sickness will always be enough to initiate a claim on income protection. Just something that, we've also heard through or insight from, from advisers and other teams. So, sticking with the topic of spotting opportunities is more dissident income protection covers a loss of income. So, anyone who really relies financially on that salary might want to consider income protection. But Shelley are there any other particular audiences that advisers listening to they could look forward to discussing income protection?

Yes, there are. There's just a few that I just wanted to highlight today. First of all, NHS medical professionals. Now, you might wonder why we've put that here or why we're talking, about this, sector of employment. But if you have any clients who are doctors, surgeons, nurses, midwives, dentists, then you will know that they have a very complicated NHS pay structure. And it can be quite tricky to advise on income protection. that dovetails with their employer benefits. So, we haven't got time to go into great detail today, but please approach us to find out more because we have a bespoke income protection plan for NHS medical professionals that offers very generous terms and will allow you to easily give advice on income protection that works hand in hand with the NHS sick pay structure.

For other areas, renters. We mentioned this right at the very beginning, but as such, a large percentage of our village towns and cities are now living in the rental sector, then I think we shouldn't ignore them. They haven't got a large lump sum to protect as a mortgage, but they certainly, as we've demonstrated, have those monthly outgoings that need a protection conversation. And of course, those clients that are employed but have no employee benefits. This group of people will be, relying immediately on savings or state benefits or help from family. So please talk to them about a solution that can kick in, pretty much immediately. And finally, business owners, do we talk to business owners about the need for income protection, maybe not just for them and other directors in the business, but maybe also for key people within that business. So, Gregor, let me hand back to you to briefly just have a look at income protection for business owners.

Yeah. So it's certainly not just individuals who are affected when it comes to being unable to work because of an illness or injury. Certainly, employees are the most valuable part of a business, particularly if they've got a unique job or maybe of a fundamental role to the business continuity. But 99.9% of all UK businesses employing between 0 and 250 employees, the market to protect these valuable assets is massive and business protections are very useful, effective way to do it. But if we focus on income protection for business owners for a moment now, depending on the structure of the business, there may be different options available. So, if it's a company, then again, the options we mentioned earlier, things like key purchasing care protection, personal protection or executive income protection could be an option. If it's a partnership than think key person protection or personal income protection could be an option.

But the one, structure that we really pull out here, because it's a very common question that we get when it comes to income protection, is those that are self-employed because they have access to keep personal protection and also personal income protection. And I think it's a really good time to bring self-employed individuals to life here, because arguably they need income protection more than employed individuals as they aren't entitled to statutory sick pay, although they can access employment and support allowance, but they also don't have access to employer sick pay arrangements. Now, I think the stat I've come across recently suggest about 4.24 million self-employed workers in the UK. That's a lot of people potentially at risk of being unable to cope if they find themselves unable to work. They actually have, sole responsibility for the cost of their business and may find themselves quickly spinning into that vicious circle, as you mentioned earlier Shelley.

That we know that for some customers, full evidence of their income may not always be available when they come to claim, for example, of customers a customer has recently become self-employed they may have to wait 12 months for the first set of accounts. That's why, depending on what evidence is available and circumstances of the claim, we may be able to pay a claim on account. So, in other words, we may be able actually pay a significant proportion off the claim or even the full benefit based on less-than-ideal evidence provided to the full evidence is forwarded on to us when available. Now to calculate that pre disability income at claim stage, we might ask for evidence such as bank statements, invoices, accounts or receipts to calculate any pre disability.

You might have heard in various different forms of communication in recent weeks that we've made some significant changes to the evidence required to prove fixed costs for self-employed, and instead of asking to see evidence such as lease agreements, offers, rental payments or phone contracts over a three year period, we know just require 12 months of cost, which is a real positive move, particularly if it was due to self-employment, who maybe previously wouldn't have been able to have that same insufficient evidence.

So just to emphasis how Royal London can help support your income protection conversations with self-employed clients, let's take a very quick look at a case study. So let's meet Gary is a self-employed builder. He's got pre-tax profits from his business insurance £60,000. His monthly fixed overheads are a total of £1,341 a month, and these include things like van hire, rent for premises, other business expenses as well that he needs to keep his business afloat. Now, Gary, needs these costs for the last 12 months. Now in terms of the cover for available for Gary, Gary's pre-tax profits which was pre-tax profits were £21,000 and his allowable fixed overheads were £16,092. And that comes to around £37,092. Now the maximum cover available through his insure is 65% of 37,092 - so that's around about the £24,000 mark. And again, we're going to assume that he's taking it Royal London policy here which is where we've got maximum cover available from now. Gary's total sum assured is £24,109.80. Now in terms of if a claim happens. So looking at the claim in the detail of Gary's involved in a car accident, he's unable to work his business can’t continue to trade with, but his overheads remain the same when he comes to a claim, Gary provides his insurers with the evidence of his predictability earnings and fixed overheads. So, as all the above fixed overheads are listed in his company accounts and are verified as continuing despite his incapacity, his claim can be paid in full. Now had Gary's accounts for the latest tax year not been available then we wouldn't have had formal evidence of his pre incapacity earnings and his fixed overheads that would continue. So, I see us despite the illness. So to make sure Gary can cover his costs, we make a payment on account.

Now this is just a provisional payment made based on the evidence that's available, subject to the full reports and accounts to be submitted when they become available. But once we have these, we make an adjustment to the interpretation payments, being made if required. In the event of any shortfall, we'd make a further payment, and any overpayment we make to Gary would be repaid to him. Now in terms of Gary's fixed costs. So 6 months after the income protection claim starts to be paid, Gary's van loan comes to the end of its term and it's got to be fully repaid now. Gary is no longer liable for those loan repayments. There are monthly amounts deducted from his outgoings and his monthly claim payments will be reduced to reflect this. Once he's ready, Gary decides to employ staff to allow his business to continue. We can see that; he's employed staff to leave his business to continue to trade in his absence. If the business continues to make a profit and the income from this cover, together with the business profit exceed the maximum benefit, then he's insurer may reduced the amount paid accordingly.

There is a lot of things we can cover, for in order to leave Gary with peace of mind that his business will still be there for him when he returns to work. But there are a few things that we don't cover in this option, so these are things if Gary employs any staff, we don't cover staff wages as part of the fixed cost flexibility within his plan. Also, fixed cost agreements that started after incapacity lost any income tax or national insurance that carries liable for. So, a little look at a case study there, but Shelley when it comes to self-employed, individuals, there's obviously a lot of considerations there. Hopefully what we've shown there today is really brought to life the importance of, of covering self-employed client. But Shelley do you have any final thoughts on what we've covered in today's session, but also where advisers might be able to go to get additional support when it comes to income protection?

Yeah, let's have a look now as we come to the end, some final thoughts and some industry support in particular. So here on the screen now you can see some of the main bodies. And they can really help boost your knowledge and help you have those income protection conversations and really help you illustrate the value of income protection. So the Income Protection Task Force, they've just launched their new website, where you'll find lots of educational content from, contributors right across the industry, Income Protection Awareness Week, it's free to attend, and it provides online events highlighting the need for and features of income protection to advisers really of all levels and experience. And in 2024, it runs from the 23rd to the 27th of September, between 12 and 1 each day. So well worth, a watch while you're eating your lunch. The Seven advisers campaign follows seven different advisers in their professional lives. They are a series of video diary entries throughout that year, and it provides really great insight into their professional life and the challenges they face, plus the successes they enjoy, including things about income, protection. And finally, Seven Families is a charity led campaign and it really, is there to raise awareness of the financial impact of long-term illness or disability.

So, I think that brings us to the end of our webinar today. Here are our learning outcomes that I think we will have, achieved from those objectives right at the beginning. I'll just leave you there for a second or two with our adviser at Royal London protection, address, where you can find confirmation of much of the things that we've talked about today. I would urge you to contact your normal Royal London sales BDM. Let us know if you don't know who that is, to have more in-depth conversations about income protection. But it leaves you now just to say from myself and Gregor, thank you so much for taking the trouble to listen in today and look out for that email with the link to your CPD certificate. Thank you so much.